Personal Finance

Tips for getting your Medicare drug coverage right during open enrollment

Key Points
  • In addition to plans adding or dropping drugs from coverage, they also can change cost-sharing aspects such as deductibles and co-pays.
  • Among people age 65 and older, 89% take a prescription medicine and more than half (54%) take four or more.
  • You can get drug coverage as a standalone Part D plan that is paired with original Medicare (Part A hospital coverage and Part B outpatient coverage) or as part of a Medicare Advantage Plan.

If you're on Medicare, now's the time to closely evaluate your 2020 prescription drug coverage.

The program's annual open enrollment period, when you can make changes that take effect Jan. 1, is under way and closes Dec. 7. With plans varying from year to year — including the drugs they cover and the amount you pay for them — you could be setting yourself up for financial woes if you don't review your options.

"Even if you think the plan you have right now is great, you might have a rude surprise when you get to the pharmacy in January and find out your drug is no longer covered," said Danielle Roberts, co-founder of insurance firm Boomer Benefits in Fort Worth, Texas.

Photo by LWA via Getty Images

With Medicare prohibited by law from negotiating drug prices, retirees — whose budgets often already are stretched thin — can face big differences in drug prices among plans. If a particular medicine isn't included on a plan's formulary — how it prices the drugs it covers — the cost could reach thousands of dollars, according to an analysis from The Senior Citizens League, an advocacy group.

Plans can add or drop medicines from their formulary — or change the pricing — from one year to the next. They also can change cost-sharing aspects such as deductibles and co-pays.

Among people age 65 and older, 89% take a prescription medicine, according to a recent survey from the Kaiser Family Foundation. More than half (54%) of that age group take four or more.

Getting prescription drug coverage through Medicare is optional, although about 70% of beneficiaries have it. (If you fail to sign up when you first qualify for coverage and change your mind later, you could face a life-lasting penalty unless you meet an exclusion.)

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You can get it as a standalone Part D plan that is paired with original Medicare (Part A hospital coverage and Part B outpatient coverage) or as part of a Medicare Advantage Plan.

During the current open enrollment period, you can change your drug coverage for next year by going either route. If the move would involve either adding or dropping a Medicare supplemental plan — aka Medigap — be sure you understand the separate rules that apply to those policies.

For 2020 the average monthly premium for standalone prescription drug plans is projected to drop to $30, from $32.50 this year. However, a lower premium doesn't necessarily mean your total out-of-pocket cost would be less.

Don't just go with the cheapest plan that pops up. It might have the most restrictions.
Elizabeth Gavino
founder of Lewin & Gavino

You can compare plans through Medicare.gov's Plan Finder, although be aware that some of the information it spits out might be incomplete. You might have to look separately at the particular plan's formulary for details on whether you'd have to try out cheaper alternatives first (so-called step therapy) or if there are quantity limits on the medicine you take. Some plans also require preauthorization for certain medications.

"Don't just go with the cheapest plan that pops up," said Elizabeth Gavino, founder of Lewin & Gavino in New York and an independent broker and general agent for Medicare plans. "It might have the most restrictions."

Also be aware that for 2020 the amount that Part D enrollees must pay out of pocket before qualifying for "catastrophic coverage" will jump to $6,350 from $5,100 this year, due to the expiration of an Affordable Care Act provision that had constrained that threshold's growth.

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While there is no cap on out-of-pocket spending for Medicare prescription drug plans, enrollees pay a smaller share of costs once they hit the catastrophic phase of coverage. Roughly 3.6 million Medicare beneficiaries reached that level of spending in 2017, according to the Kaiser Family Foundation.

Sometimes you can find medicines at a cheaper cost than through your plan, such as with a free drug-discount card. However, if you go this route instead of through your insurance, your plan won't count the medicine's cost and your copay toward your deductible or other calculations used to determine your share, Gavino said.

Additionally, Medicare beneficiaries with limited resources might qualify for the program's "Extra Help," which assists with prescription drug costs.

Also be aware that if you choose a standalone drug plan and pair it with original Medicare, you're stuck with it for a year unless you qualify for a special enrollment period (e.g., you move to a different state).

On the other hand, if you choose drug coverage through an Advantage Plan, you can get a do-over early next year. Between Jan. 1 and March 31, you can switch to another Advantage Plan that suits you better (including its drug coverage) or drop the plan and go to original Medicare. In that case, you're permitted to choose a standalone prescription plan.

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